Universal Free Trade

[David]

Would the enactment of universal free trade be better or worse for society on a economical perspective?

 

For example, do you think the general standard of living be higher than it currently is?

[Terry]

I used to be very opposed to free trade. I believed it was bad for developed countries, like the US, and bad for "exploited" countries like China. However, the monetary games in which all governments have engaged in over the last few years have caused me to completely rethink my position.

 

Global problems, such as job displacement / off shoring, are not to be blamed on either the consumers or producers.  The real problem is fiat currency and the ensuing government meddling into matters far beyond the capacity of politicians to understand.

 

This isn't a tangential departure from your question; I see these issues as opposite sides of the same coin - to stretch the metaphor possibly to the breaking point.  The problem with international trade is sovereign money.  And the problem with sovereign money is that it is based on a lie disguised as value.

 

Trade at its most basic level is the exchange of value for value.  Money was a fantastic abstraction, possibly the most important in all of human history.  It replaced the barter system with an surrogate.  Thus you no longer had to take your eggs from person to person trying to find someone who would trade you milk.  You could offer your eggs to someone who wanted them in exchange for money.  You were then assured that you could later exchange that money for the milk.  An added bonus dimension is time. The money might be weeks older than the eggs would have ever lasted, and the man with the milk might have a horrible egg allergy and would never otherwise be available as a source of your milk.  Money solved all these problems at once.

 

But starting with King Louis XV in France the government found it could substitute the gold, which it did not have as a consequence of decades of living beyond its means, with paper.  The paper had value because the government said it did.  Every fiat currency ends in hyper-inflation, misery, and usually war and death.  There are no exceptions, only stories not yet played out.

 

So the solution to war, inequality, and a vast majority of human suffering - GOLD. Gold is the great equalizer.  Its very scarcity enforces the value for value proposition.  It makes honest men out of all who trade, be their inner desires of the highest nobility or the lowest dregs. It is an inviolate standard.

 

The degree to which a society embraces real value defines the welfare of its people.  THEN, and only then, should a country be permitted to trade with you.  Without an absolute standard based in the physical world you end up with the grotesque excesses and crashing lows such as were seen in 1920s and 1930s - or 2000s and 2010s. both respectively.

 

So universal free trade?  Absolutely, but only if there is a universal standard of value.

[Vertigo_One [Ops Mod]]

There are no exceptions, only stories not yet played out.

 

No.

 

I'm sorry but that's bad intellectual posturing of the worst kind. You cannot argue that every flat currency system WILL fail without proof. Just because you can provide examples where it has failed, does not mean you can prove it will always fail. This is like Marxist theory. It consistently argues that Marxism would work in practice and when everyone points to the fact that all of the attempts to make it work have failed, the response of the theorist is "Yes, but it will work...eventually".

 

I'm not taking a gripe with your specific theory about money, only that the idea that you can say with blasé  confidence that your theory is correct despite the myriad examples of it not failing based on the argument "it will fail eventually" is riddled with flaws. Prove that they will fail eventually. Do not just expect them to.

[Terry]

Odd that you would be the one to object to that.  It is an absolute because fiat (fake) currencies are susceptible to human flaws.  Call it covetousness, sloth, whichever of the 7 deadly sins you wish to apply to "the desire for the unearned". Fiat currency is exclusively about decoupling a countries "money" from "an arbitrary thing of value".  In the US paper money existed for many many decades before the government ultimately reneged on the promise to deliver precious metals "on demand".  In Britain it happened much sooner.  Research the on-again, off-again flirtation of Europe with the gold standard before, during and after WW I.  

 

This decoupling from "a thing of value" AKA: REALITY is what started the debt fueled excesses of the 20th century.  It is also the reason why the current dilemma cannot be fixed -- at least not by the copious application of the same policies that caused the problem in the first place.

 

So, no I cannot prove that every society based on fiat currency will fail.  And it does very much depend on your definition of "fail".  But to (slightly mis-) quote one of the greatest understatements of all time: they inspire irrational exuberance and are unsustainable. Today's excesses become tomorrow's norms until eventually the entire illusion collapses under it's own weight.  So, from the standpoint of international trade, economic stability, liberty, and plain old  human happiness, I give it an EPIC FAIL.

[Vertigo_One [Ops Mod]]

It may be the case that you have a good argument for why they are bad, but my problem with your theory is that I could say "but I have X, Y and Z example that proves you wrong" and your response to that is "they will prove me right in the future". That's what my issue is. The idea that simply by waiting it out, you can prove yourself right, and thus consider that a legitimate defence. Its the same as Dawkins argument about the possiblity of finding an organising principle for physics as evolution is for biology. One has not been found yet, but he maintains that it will be possible. Fine, but that argument is speculative, and thus cannot defeat another argument until it is proven.

[Terry]

I hear what you're saying, and conceptually I agree with you.  But I am irresistibly drawn to the Star Trek quote: "If I drop a weight on a planet with positive gravity [yes I know] I do not have to see it hit the ground to know that it will.

But you are right. Just because something has always happened is not a scientific proof that it always will happen.  My argument however is based on psychology not hard science. Specifically human nature: because humans have always acted in this way, they always will.  With the human affinity for illogical behavior by demonstrating countless repetitions of the same mistakes spanning thousands of years, that's probably about as close as anyone can come to a scientific assessment

 

There is nothing whatsoever the inanimate element Gold actively brings to this discussion.  Rather it is the modification (complete rewriting) of human behavior that gold forces into the equation. If people were universally good we wouldn't need gold, or laws.

 

[I tried to carry the point to it's ultimate conclusion and write something about Marxism actually working in that universe.  It would have been a great ending line but I cannot envision that world and am quite certain I wouldn't want any part of it.  So you're stuck with this lame ending instead.]

[Mr. Anderson]

You seem to have a religious faith in gold as the absolute equalizer and savoir to the world. It's almost cute, but then I remember I am repulsed by that kind of thoughtlessness. 

[Mr. Anderson]

First off, gold is not a great equalizer. There was more inequality in America/Canada before we switched to fiat money than there is now, for starters. If gold was the standard, then those with gold are going to be the richest. If water was the standard, then those with water would be the wealthiest. If silver was the standard, those with silver would be the wealthiest. Saying that Gold is this magic material that would make the world a better place is historically ignorant and logically moronic. 

I'm not going to call fiat money the be all and end all of currency development, but it's certainly more stable and reliable than gold.

.  Without an absolute standard based in the physical world you end up with the grotesque excesses and crashing lows such as were seen in 1920s and 1930s - or 2000s and 2010s. both respectively.

You are aware that in the 1920s and 1930s, the gold standard currently existed? So... this doesn't add up. This doesn't add up at all.

The real problem with these dates was lack of financial regulations, not lack of a gold standard - because there was one during the 1920s and 30s. 

So universal free trade?  Absolutely, but only if there is a universal standard of value.

This is utterly idiotic. There's no evidence for this, just empty rhetoric. If the world switched to a gold standard, poof, fairy dust would fall from the skies and all the world's problems will dissolve. Famine and poverty in Africa? Gone. Low and inhumane labour wages in China? Gone. Totalitarian governments who actively suppress and exploit their people for labour? Gone.

The gold standard cures all! Erm, forget about all the shittiness that existed during the Gold standard in many countries, clearly that's unimportant.

  Every fiat currency ends in hyper-inflation, misery, and usually war and death.  There are no exceptions, only stories not yet played out.

Another unscientific and utterly useless assertion. Isn't it bizarre that the most technologically and socially advanced countries have fiat currency? 

[CD]

First off, gold is not a great equalizer.

Your points on this still standing, I would like to add that gold reserves run out.  Where do you get more gold? Where ever it is, and usually, that's in someone else's country.  European colonialism had a lot to do with running out of gold.  Not just that, but it did. 

And even if gold was an equalising force (as if) who defines it's value?  It's just as arbitrary as saying this piece of paper is worth $1.  At least with paper, I can grow more trees.  But with gold, well, the alchemists already tried that one. Newton was an alchemist by the way, and he was one of the blokes behind the gold standard, in England.  He's probably had more global influence with that, than his theory of gravity.

I'm not going to call fiat money the be all and end all of currency development, but it's certainly more stable and reliable than gold.

There's a difference between deciding that we're just going to have paper, or just gold, or just paper backed by gold, than defining fiat currency.  As I understand, the problem is the debt.  Governments borrow from the reserve bank, at interest. Money is printed.  It goes into circulation.  Governments receive income through taxes (and these days, a thousand other things too), and hope it's more than their costs, as well as the interest.  Money goes back to the reserve bank.  The debt is never fully repaid, because money always needs to be in circulation.  Whether that money was backed by gold, or the milk teeth of infants, is probably irrelevant to that equation.

[Louis Chen]

Hi David,

Are you referring to taxes and tariffs and such when you're talking about "universal free trade"? If you are then this is my opinion on the subject. Whether it would be good for your society would depend on where you live. americans would love it, Europe would oppose of it and Asia would hate it. This is why:

Currently trading blocs allow countries within those trading blocs to trade without tariffs and taxes, countries outside of these trading blocs, however, have to pay the tariffs to import goods from the countries within said trading bloc. Why else don't you see as many American cars in Europe? Because they can make cars themselves that arejust as good and cost no import tax. This is why the USA wants to join the EU, so that it can import goods from Germany, the UK, Italy etc., last time I heard, anyway, (which is also extremely stupid in my view; it's called the European Union for a reason).
Anyway, it's because of these trading blocs that developing Asian countries such as Thailand and Indonesia can develop, if they want goods not available in their own countries, they don't have to look any further than China, yet when they want to export, they can also easily do it within Asia. Pretty much it boosts the economy of every country in that region. The same goes for the EU, they have the powerhouses and then the countries which can provide cheap labour so they are really quite well off. The PIIGS just have horrible economical management.

If the tariffs are lifted, then America can freely trade with anyone they please. This causes a problem for countries like Thailand because the US probably won't trade with them, and China would probably import more from European countries so there goes the export market for countries like Thailand. As for Europe, they know that The US has to trade with them, and so by removing the tariffs, it just means less money for them. All in all, the poorer countries are going to have the bigger problem either way. The African countries have no real chance, because all of their trading blocs are with other African countries, which means they don't really have any export/import markets (why would you trade if you don't have enough money to sustain your country in the first place).

So in the end, it depends where you're from, Americans would gain from it, Europeans would probably lose from it, but only marginally, Asians may lose or gain, depending on which country, Africa would be almost unaffected and Australia and New Zealand would probably lose, marginally as well.

Hope that answered it. It's really late and yeah.

[Latch33570]

I think it would be better overall. As usual though we need to put restrictions or regulations on the imports, such as fair wage for over there and environmental regulations. No use regulating our guys out of business here just to have the corporations say polute the environment over there.

[Mr. Anderson]

Depends on a lot. But unregulated free-trade is not preferable to this concept known as fair trade.

Essentially fair trade is "we won't trade with you, unless you provide a minimum standard for your people in the labour world.". It's a bloody brilliant concept, but perhaps isn't as realistic or doable as freetrade, for the obvious reasons.

In an ideal world, the biggest and most developed countries would adopt fair trade, to inspire other governments and countries throughout the world to improve labour conditions for everyone.

For example, do you think the general standard of living be higher than it currently is?

NAFTA was signed by America, Canada and Mexico. Freetrade for all of these countries. Conditions in Canada generally haven't improved since the signing of this treaty, so no, it's not inherent that conditions will improve -  conditions can regress, in fact. 

[Vertigo_One [Ops Mod]]

Free trade has to be REAL free trade. NAFTA isn't free trade enough because government intervention in the market is still allowed. Vis a via - Subsidies for traded goods that artificially alter their prices.